Alex Kwiatkowski, a Senior Consultant in the Banking practice of SAS, provides his view on ten trends that will this year dominate the agenda of executives in Europe’s banking industry.

Digitalisation of corporate banking

Corporate banks finally get hip to digital, as the general murmurings of service dissatisfaction among national and multinational companies prove impossible to ignore. There’s already been some digitalisation of the back office (e.g. cash management), but in 2018 progress will extend through the middle office (where new banking products are created) and into the front office (where relationship managers get their hands on the digital tools to make their job easier and their clients happier).

Growth of FinTech and RegTech in emerging markets

During 2017 FinTech and RegTech spending continued to proliferate in EMEA’s emerging markets. This will continue during the next 12 months (and beyond), with new firms entering the competitive environment. It doesn’t take a genius to deduce that this trend is intrinsically linked with improving levels of financial inclusiveness. Exciting times are ahead.

Platformification efforts accelerate

Platformification, the bundling together of multiple services onto one online platform, providing an efficient, automated and integrated customer experience, is one of the most significant developments in banking. At the risk of stating the obvious, these three outcomes are highly desirable for banks, as in combination they drive improved financial and operational performance. Platformification also puts banks on a similar plane to other industry sectors (e.g. retail), although any CEO who thinks his or her firm is about to become the Amazon of banking needs to lower their expectations.

Technology innovation boosts financial inclusion

Connecting – and reconnecting – people to the financial system remains a priority across EMEA (and the rest of the world) in 2018. While improvements have been made in recent years to close the gap between those who can access banking services and those who can’t, progress needs to go at a faster pace. This necessitates national governments, financial service providers (traditional and non-traditional), telcos and technology vendors (device manufacturers, ISVs, app developers etc.) working collaboratively.

Understanding EU-wide stress tests in an era of IFRS 9

The latest round of EU-wide stress testing commenced last month. The results will only be visible by November 2nd, but extra significance is assumed as this is the first assessment undertaken in the era of IFRS 9 – the standard which specifies how an entity should classify and measure financial assets, financial liabilities, and some contracts to buy or sell non-financial items.

Blockchain in lending and trade finance

Blockchain has been slower to come out of the lab and into the live environment that I anticipated a couple of years ago, but my senses tell me that this will change in 2018. Lending and trade finance are two obvious areas where blockchain can disturb the status quo by reducing the need for paper-based processes (and sounding the death knell of the fax machine). And then there’s the blockchain analytics angle to explore too.

Extension of open banking standard(s)

Within the more advanced economies of EMEA, the concept of open banking – which is where banks make the transition to be marketplaces for financial services (see ‘Platformification’ above) – has taken the industry by storm. To weather a storm, protection in the form of an umbrella is required. In this instance, the umbrella takes the form of an open banking standard, which uniformly prescribes the steps which firms must take. Developments such as PSD2 have hastened standardisation, but there’s still a huge amount of scope for further improvement. In Europe, a collaborative effort is being made by AIB Group, Bank of Ireland, Barclays, Danske, HSBC Group, Lloyds Banking Group, Nationwide, RBS Group and Santander to create an open API standard. I expect to see more ‘groupthink’ examples emerge as the year unfolds.

Beginning the preparations for regulatory adjustments

2018 will witness some major regulatory developments. There’s the go-live for PSD2 and GDPR in Europe, while at a global level Basel IV begins to take a firmer shape. Moreover, although the rollback of Dodd-Frank is going to hit US banks hardest, the ripples caused by this development will scurry across the Atlantic to affect firms in EMEA (i.e. those who maintain operations in Trump-land) to varying degrees too. Success hinges on being prepared.

M&A activity is back on the agenda in the search for growth

Several EMEA banks have recently installed new CEOs, and they’re sure to be seeking ways to deliver sustainable revenue growth to keep their shareholders happy. This stimulates renewed interest in M&A activity, and while the era of the mega-merger is behind us, don’t be surprised if 2018 witnesses some unlikely unions. With Chinese companies sitting on huge cash piles, who’s to say they won’t make a series of strategic investments to gain, or strengthen, a position of potential power.

AI-fever takes hold, but some banks will lose their grip on reality

There’s no denying that Artificial Intelligence (AI) – and it’s ‘extended’ features, namely machine learning and deep learning – is going to transform not just banking but the entire world as we know it. However, I’ll just inject a healthy dose of reality. AI isn’t a magic wand. It needs to be handled carefully, and that means striking the right balance between humans and computers. Let’s use AI responsibly. There’s been enough recklessness in the world prior to AI bursting forth.